I always thought that pwetty tiny faiwies were a comparably recent idea, the Tiny People Living At The Bottom Of My Garden - probably Victorian-era. There are certainly scattered accounts of tiny individuals across folklore (although I'll have to look over my Celtics again), but I'm not certain that fairies/fey were uniformly so. In fact, plasticity and variability are the hallmarks of such populations, and I don't know whether they were hereditary.
Probably why I hate the Pwetty Faiwies so much: my accuracy stickling.